Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals

Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action

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•  Identify the benefits of self-setting, continuous, “relative” performance systems and on-demand decision-making for your company  

•  Learn how to develop the right benchmarks and associated peer groups for your company to maximize the value of your investment in real-time benchmarking  

•  Understand how to use real-time benchmarks to produce continuous dialog and reflection, and deliver the information company leaders need to develop and maintain competitive advantage  

After attending this event you will be able to:

Learning Objectives

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Welcome to Proformative

Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals

Using Real-Time Financial Benchmarks to Drive Dynamic Decision-Making and Action Niels Pflaeging, Author, Influencer, Advisor on Leadership Transformation Jon Kondo, Sr. Software Executive and Advisor

high dynamics

Local markets, high customization

The historic course of market dynamics

The historic course of market dynamics

Sluggish/dull, low dynamics

high dynamics

Spacious markets, little competition

Local markets, high customization

Sluggish/dull, low dynamics

high dynamics

high dynamics

Spacious markets, little competition

“Outperformers” exercise market pressure over

conventional companies Local markets,

high customization

The historic course of market dynamics

Formal part of value creation

Solution: Machine

Dynamic part of value creation

Solution: Man

Sluggish/dull, low dynamics

high dynamics

high dynamics

Age of Crafts Manu-

facturing

Industrial Age/ Age of

Tayloristic Industry

Age of Global Markets

1850/1900

Spacious markets, little competition

“Outperformers” exercise market pressure over

conventional companies

Local markets, high customization

1970/80 today

The “Taylor Bathtub” - and what it means for companies today

We must stop riding the dead horse: Let´s work on the model, not in the model!

•  Fixed, individual targets •  Management by Objectives •  Budgets and Plans •  Performance Appraisal •  Hierarchical Pressure •  Pay by Position or Performance •  Incentives and Bonuses •  …

How to let go of traditional Performance Management practices

•  Fixed, individual targets •  Management by Objectives •  Budgets and Plans •  Performance Appraisal •  Hierarchical Pressure •  Pay by Position or Performance •  Incentives and Bonuses •  …

•  Transparency & Improvement •  Comparisons between peers •  Comparisons with previous periods •  Dialog and Dissent •  Social and group pressure •  Pay by market value •  Results Sharing •  …

How to let go of traditional Performance Management practices

Low dynamics

High dynamics

Polling Question

Industry

Retail

Services

Government/ NGOs

It is possible.

Some pioneers of the new model

Fixed, negotiated targets

Most important competitor

(28%)

Market (25%)

Plan (15%)

Actual (21%)

Target: absolute ROCE in % (here: 15%)

[expected market Ø: 13%]

Plan

Comparison: Plan-Actual

Actual

•  Interpretation within the plan-actual-comparison: “Plan was outperformed by 6 percentage points” > positive interpretation

•  Better ROCE of the market average and the performance of the most important competitor remain unnoticed!

Relative, self-adjusting targets Target: relative ROCE in % (to market)

Most important competitor

(28%)

Market (25%)

Target: ROCE in % better

than market avrg. Actual (21%)

•  Interpretation within actual-actual comparison: “Performance was 4 percentage points below competition!” > negative interpretation

•  Absolute assumptions at the moment of planning don't matter.

•  Targets always remain updated and relevant!

[independent from expected

market Ø]

Target Actual Comparison: Market-Actual

From fixed to relative targets & measures

Accounts/KPIs vs prev. periods

last mnth

Same mnth last year

Same mnth prev.. year

Ø last 12

mnths

Ø 12

prev. mnths

Indicators or Groups of accounts

Rankings (“league tables”)

Company KPI Competitor A 31% Competitor E 24% Competitor C 20% Us 18% Competitor B 13% Competitor D 12% Competitor G 10% Competitor F 8%

Regions KPI Region G 7% Region E 7% Region B 6% Region F 4% Region A 3% Region D 3% Region C 1% Region H 0%

Snapshot (static) w/benchmarks

KPI 2

Us Our

unit B

Our unit A

Compe- titor B

Compe- titor A

KPI 1

Trend with references (A) Maximum

Curve with variance

KPI (B) Gliding average

Time (Actuals)

Trend with benchmark

Us

Competitor A

Time (Actuals)

KPI

Trend with tolerance

Tolerance levels

Time (Actuals)

KPI

Us

out of bounds

Practice: Relative measures & reporting

Polling Question

Law Beta Alpha § 1 Freedom to act Connectedness not Dependency § 2 Responsibility Cells not Departments § 3 Governance Leadership not Management § 4 Performance climate Result culture not Duty fulfillment § 5 Success Fit not Maximization § 6 Transparency Intelligence flow not Power accumulation § 7 Orientation Relative Targets not Top-down prescription § 8 Recognition Sharing not Incentives § 9 Mental presence Preparedness not Planning §10 Decision-making Consequence not Bureaucracy §11 Resource usage Purpose-driven not Status-oriented §12 Coordination Market dynamics not Commands

From org design principles for the industrial age to contemporary ones

Practices of the past (selection)

20

”Meritocracy“ Budgeting Planning

Control of work hours

Job Descriptions

Competencies Management

Incentives Individual targets

Performance Appraisal/360°

Salary ranges

Training budgets Personnel Development

Org charts

Target negotiation

Holiday applications

”Personnel Expenses“

Suggestion boxes

Assessment Centers

Knowledge Management

Pay for Performance

Paid extra hours

Bonuses

Sales quotas

Dress codes

Job titles

HR

Allocations

Cost Management

Plan-Actual variances

Forecasting

MbO Strategic planning

Travel policies

Forecasting

Jours fixes

SWOT analysis

Earnings guidance

Q & A  

Polling Question

@NielsPflaeging nielspflaeging.com

organizeforcomplexity.com betacodex.org

slideshare.net/npflaeging www.organizeforcomplexity.com

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Thank You  

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